1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
Commission File No. 0-10810
KIEWIT ROYALTY TRUST
(Exact name of Registrant as specified in its charter)
Nebraska 47-6131402
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Trust Division
U.S. Bank National Association
1700 Farnam Street
Omaha, Nebraska 68102
----------------------------------------
(Address of Principal Executive Offices)
(402) 348-6000
------------------------------------------------
(Registrant's telephone no. including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No
--- ---
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
As of September 30, 1999, there were 12,633,432 Units of
Beneficial Interest of the registrant outstanding.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
KIEWIT ROYALTY TRUST
STATEMENT OF ASSETS, LIABILITIES AND TRUST CORPUS
as of September 30, 1999 and December 31, 1998
ASSETS 1999 1998
- ------ ---- ----
Cash equivalents $ 2,563,428 $ 163,236
Royalty and overriding
royalty interests in coal
leases 167,817 167,817
Less accumulated amortization (109,312) (98,702)
----------- -----------
Net royalty and overriding
royalty interests in coal leases 58,505 69,115
----------- -----------
Total Assets $ 2,621,933 $ 232,351
=========== ===========
LIABILITIES AND TRUST CORPUS
- ----------------------------
Distribution payable to Unit Holders $ 2,563,428 $ 163,236
Trust corpus: 12,633,432 Units of Beneficial
Interest authorized and outstanding 58,505 69,115
----------- -----------
Total Liabilities and Trust Corpus $ 2,621,933 $ 232,351
=========== ===========
The accompanying notes are an integral part
of the financial statements
-2-
3
KIEWIT ROYALTY TRUST
STATEMENT OF DISTRIBUTABLE INCOME
for the three months and nine months ended September 30, 1999 and 1998
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
Royalty income $ 2,557,650 $ 2,884,143 $ 4,585,829 $ 5,622,543
Interest income 18,955 23,975 36,490 49,798
Trust expenses (13,177) (11,021) (43,566) (41,776)
----------- ----------- ----------- -----------
Distributable income $ 2,563,428 $ 2,897,099 $ 4,578,753 $ 5,630,565
Distributable income per
unit (12,633,432 Units
Outstanding) $ .2029083 $ .2293201 $ .3624315 $ .4456877
STATEMENT OF CHANGES IN TRUST CORPUS
for the nine months ended September 30, 1999 and 1998
1999 1998
---- ----
Trust corpus as of January 1 $ 69,115 $ 82,206
Amortization of royalty interests (10,610) (10,437)
Distributable income 4,578,753 5,630,565
Distribution to Unit Holders (4,578,753) (5,630,565)
----------- -----------
Trust corpus as of September 30 $ 58,505 $ 71,769
=========== ===========
The accompanying notes are an integral part
of the financial statements
-3-
4
KIEWIT ROYALTY TRUST
Notes to Financial Statements
as of September 30, 1999 and December 31, 1998
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not necessarily include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the Trustee's opinion, all
adjustments necessary for a fair presentation have been included. For further
information, refer to the financial statements and footnotes included in the
Trust's annual report on Form 10-K for the year ended December 31, 1998.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared on
the following basis:
(a) The royalty income recorded for a month is the amount computed
and paid by the lease holder to the Trustee for such month.
(b) Trust administration expenses are recorded in the month they
accrue.
This basis for reporting royalty income is thought to be the most meaningful
because distributions to the Unit Holders for a month are based on net cash
receipts for such month. However, these statements differ from financial
statements prepared in accordance with generally accepted accounting principles
because, under such principles, royalty income for a month would be based on
production for such month without regard to when calculated or received. In
addition, amortization of the net royalty and overriding royalty interests,
which is calculated on a units-of-production basis by lease, is charged directly
to trust corpus, since such amount does not affect distributable income.
-4-
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
a. MATERIAL CHANGES IN FINANCIAL CONDITION.
Kiewit Royalty Trust is a royalty trust with royalty and
overriding royalty interests in certain coal leases. The Trust was formed for
the purposes of (1) administering the income received from such coal leases and
(2) distributing such income (together with interest earned thereon less payment
of or provision for obligations) to the holders of the Units of Beneficial
Interest.
b. MATERIAL CHANGES IN RESULTS OF OPERATIONS.
During the nine months ended September 30, 1999, the Trust
received a total of $4,585,829 of royalty and overriding royalty payments;
during the three months ended September 30, it received a total of $2,557,650 of
such payments. The following schedule reflects the royalty and overriding
royalty amounts received by the Trust from each mine.
Three Months Ended Nine Months Ended
Mine September 30 September 30
---- -------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
Decker $1,400,606 $1,902,589 $3,317,755 $4,531,489
Big Horn 9,625 7,196 120,655 116,696
Spring Creek 1,147,419 974,358 1,147,419 974,358
---------- ---------- ---------- ----------
$2,557,650 $2,884,143 $4,585,829 $5,622,543
========== ========== ========== ==========
i. DECKER MINE.
The amount of royalties and overriding royalties
received by the Trust with respect to the Decker Mine decreased to $3,317,755 in
the nine months ended September 30, 1999 compared to $4,531,489 during the same
period in 1998. For the third quarter of 1999, the amounts received decreased to
$1,400,606 compared to $1,902,589 during the third quarter of 1998. These
changes in royalty and overriding royalty amounts received were due to changes
in the relative amounts of coal mined under leases bearing high and low
overriding royalty rates per ton, which are a normal result of the execution of
a mining plan encompassing several coal leases bearing different royalty rates.
ii. BIG HORN MINE.
Overall royalties received from the Big Horn Mine
increased to $120,655 during the nine months ended September 30, 1999 from
$116,696 in 1998, and increased to $9,625 in the third quarter of 1999 from
$7,196
-5-
6
in the third quarter of 1998. The increases for 1999 reflect increased
production in the relative amounts of coal mined under leases bearing high and
low overriding rates per ton.
iii. SPRING CREEK MINE.
Royalties received from the Spring Creek Mine
increased to $1,147,419 in the nine months ended September 30, 1999 compared to
$974,358 during the same period in 1998. The Trust received $1,147,419 in the
third quarter of 1999 compared to $974,358 during the same period in 1998 from
the applicable lease. Royalties from the Spring Creek Mine are typically paid by
the mine operators on an annual basis during the second half of the calendar
year. The increase in royalties received from the Spring Creek Mine this year
is due to the fact that the Spring Creek Mine shipped more tons of coal this
year than it did last year.
c. YEAR 2000 ISSUE.
The "Year 2000" computer problem has arisen because many
computer applications worldwide will not properly recognize the date change from
December 31, 1999, to January 1, 2000, potentially causing production of
erroneous data, miscalculations, system failures and other operational problems.
Since the Trust does not have any computer system of its own,
initiatives to address the Year 2000 issue has been undertaken by the Trustee,
U.S. Bank National Association, to evaluate the Year 2000 impact on its critical
computer hardware and software. The Trust does not incur any cost in the
Trustee's addressing of its Year 2000 problem.
The Trustee has indicated to the Trust that it has developed
a strategic plan focusing on achieving Year 2000 compliance. Certain systems
are being replaced, modified or reprogrammed to be Year 2000 compliant. If
necessary, new hardware and software is being purchased to be Year 2000
compliant. The Trustee recently completed a critical testing phase in its Year
2000 preparation. The testing indicated that all of the systems worked properly.
This was the second phase of the Trustee's Year 2000 testing and included most
of the computer applications, such as deposits, loans, and the majority of the
other systems included in the enterprise. These tests were performed in a "time
machine" environment where the Trustee's personnel could change the dates to
coincide with dates that may be problematic such as December 31, 1999, January
3, 2000, February 29, 2000 and others that are specific to each application.
The data utilized in these tests was a copy of actual data and therefore was a
good indicator that the applications will function correctly. No live customer
data was affected by the tests.
-6-
7
The Trustee has also finalized the creation of contingency
plans for all critical business functions within the organization. These plans
will serve as backup for functions that may be effected by unexpected problems
during and after the Year 2000 event occurs. The Year 2000 efforts of the
Trustee and any related third parties are not within the Trust's control,
however, and their failure to remediate Year 2000 issues successfully could
result in business disruption, increased operating costs and increased credit
risk for the Trust. At the present time, it is not possible to determine whether
any such events are likely to occur, or to quantify any potential negative
impact they may have on the Trust's future results of operations and financial
condition.
Ultimately, the potential impact of the Year 2000 issue will
depend not only on the success of the corrective measures undertaken by the
Trustee, but also on the way in which the Year 2000 issue is addressed by
vendors, service providers, counterparties, utilities, governmental agencies and
other entities with which the Trustee and the Trust do business. These parties
are receiving communication from the Trustee to heighten their awareness of the
Year 2000 issue, to learn how the Trustee is addressing it and to evaluate any
likely impact on the Trustee and the Trust.
The foregoing discussion regarding Year 2000 contains
forward-looking statements, which are based on management's best estimates
derived using various assumptions. These forward-looking statements involve
inherent risks and uncertainties, and actual results could differ materially
from those contemplated by such statements. Such material differences could
result in, among other things, business disruption, operational problems,
financial loss, legal liability and similar risks.
-7-
8
PART II - OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Trust is a
party or which any of its property is the subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
4.1 Kiewit Royalty Trust Indenture dated May 17, 1982,
as amended June 9, 1982 and June 23, 1982 (filed as
Exhibit 1 to the Trust's Form 10 filed with the
Securities and Exchange Commission on December 23,
1982, and incorporated herein by reference).
4.2 Order dated September 23, 1994, of the County Court
of Douglas County, Nebraska (filed as Exhibit 2 to
the Trust's Form 10-Q filed with the Securities and
Exchange Commission on November 14, 1994, and
incorporated herein by reference).
27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
-8-
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
KIEWIT ROYALTY TRUST
(Registrant)
By: U. S. Bank National Association
in its capacity as
Trustee and not in its individual
capacity or otherwise
By: /S/ SUSAN K. ROSBURG
---------------------------------
Susan K. Rosburg
Trust Officer
Dated: November 9, 1999
-9-